Scrap the Cap, Strengthen Social Security (Sen. Harkin, April 4)

[ProSense]

Scrap the Cap, Strengthen Social Security

By Daniel Marans

When Sen. Tom Harkin (D-IA) called for "raising the cap" on Social Security's taxable wage base at a "Back Off Social Security" rally and press conference a week ago, he elicited roars of approval and chants of "raise the cap" from the hundreds-strong crowd. But if, as Sen. Harkin noted, the cap is fundamentally unfair, then why was it even created? And would raising the cap alone solve Social Security's projected long-term shortfall? What about scrapping the cap altogether?



Sen. Tom Harkin (D-IA) speaking about the cap on Social Security's taxable wage base at the "Back Off Social Security"
event on the Hill on March 28th. "Why is it that a factory worker making $50,000 pays the payroll tax on 100 percent
of her income, while a banker making $500,000 pays the tax on only the first $106,800, just 21 percent of his income?
Let's raise the cap!" Harkin proclaimed.

<...>

The cap increases annually with the Average Wage Index (AWI), which reflects the average growth in the country's wages. Legislation passed in 1977 instituted periodic increases in the cap that were meant to insure it would cover 90% of the country's earnings. By 1983, the last time Social Security was reformed to account for financial and demographic realities, the cap covered 90% of earnings.

<...>

But even as it has served its purpose, the cap has created a situation that many Americans would consider unfair (if they even knew it were the case). Today the cap is at $106,800. That means that no matter how rich you get, you only have to contribute FICA taxes on the first $106,800 of your earnings. Middle class people pay 6.2% of their income to the program, and the rich pay a fraction of that amount on theirs.

In addition to its unequal nature, in recent years, the cap has covered a diminishing portion of country's earnings, putting it under sharper scrutiny from the same crowd that once tacitly accepted it. Since 1983, average wage growth has been skewed by disproportionate increases in the wealthiest Americans. Growth in the AWI has not reflected widespread wage increases. As a result, the cap now only covers 85% of earnings and is projected to cover 83% in the coming years.

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[msongs]

1. Harkin is the anti-Obama: you don't hear him sqwaking cut cut cut like a parrot lol nt

[RC]

2. The real reason why Social Security is in trouble in the first place.

The living Wage jobs that paid into Social Security are being eliminated and outsourced.
The fix is to change the Tax Code so as to NOT reward corporations for outsourcing.
Raising any caps on Social Security is not the solution. By raising the cap, the original problem, outsourcing, remains.
Raising the cap on S/S can be analogous to stretching a blanket, so it will cover more, but the blanket will be thinner as a result, as more money will then be paid out gaining nothing.
In other words, raising the cap is just diddling with the symptoms, it is not dealing with the root cause which is rising unemployment and the loss of our Living Wage jobs.
We need to deal with the root cause, not just treat the symptoms.

[ProSense]

3. "The fix is to change the Tax Code so as to NOT reward corporations for outsourcing."

"Raising any caps on Social Security is not the solution. By raising the cap, the original problem, outsourcing, remains."

Nonsense. The two have nothing to do with each other.

Raise, no, scrap the cap. Stop protecting high-income earners.

[RC]

5. Think about it

The loss of our living wage jobs and high unemployment equals less being paid into Social Security.
How doesn't that not have anything to do with the future shortage in Social Security?

[Skink]

4. Obama talked about this before he got elected.

he said fix is easy just raise the cap.

[TheKentuckian]

7. That is a piece of the puzzle but only a piece.

We have to get our retirement out of the general fund so it can't be spent on "drown the pig" tax cuts and wars.

We must address wages and employment, yesterday. The system was certainly designed with growth in mind. Decades of stagnant and now declining wages are not in the Social Security formulation.

We need to apply the tax to investment income, which would allow us to increase benefits and/or lower the retirement age which would increase demand, creating more opportunity while putting upward pressure on wages by reducing the available workforce.

Just raising the cap only gives Congress more of our money to divert into evil schemes and foolish military adventures.

[NYC_SKP]

6. K&R. (nt)

[ProSense]

8. Please respond to this

poll.